ARK 21Shares Updates Ethereum ETF Application, Considers Staking and Cash-Creation Model

ARK 21Shares, alongside Cathie Wood's ARK Invest, has revised its application for a spot Ethereum exchange-traded fund (ETF). The updated proposal opts for a cash-creation model, similar to its approved Bitcoin ETF, and includes plans for staking Ethereum to generate extra income.

The new filing states that only cash will be used to create and redeem ETF shares, in line with SEC preferences for cash transactions over in-kind redemptions. This change follows discussions with the SEC and aligns with recent adjustments made by other ETF issuers.

Additionally, the amended filing introduces a staking component, allowing the sponsor to stake some of the trust's assets through trusted third-party providers. Staking rewards would be considered income for the trust, potentially boosting investor returns.

While staking offers income opportunities, it also carries risks, including potential ETH loss through slashing and extended lock-up periods. The inclusion of staking-related provisions shows the issuer's willingness to engage with regulators on this aspect.

Bloomberg ETF analysts Eric Balchunas and James Seyffart noted the changes, with Balchunas seeing alignment with approved Bitcoin ETFs. However, Seyffart remains cautious about SEC approval for staking activities in Ethereum ETFs.

Despite uncertainties, ARK 21Shares remains optimistic. The SEC faces deadlines for ETF decisions, with Seyffart anticipating a comprehensive ruling by May, similar to the approach taken with Bitcoin ETFs.